Anyone else playing TMTA today?

Discussion in 'Stocks' started by CommercEngineer, Aug 10, 2005.

  1. Chagi


    I'm holding a long position that I bought before earnings, going to give this some time to develop. As for pulling back, it's pulled back a bit since the open, but is actually up since yesterday's AH trading (last trade was around $1.30).

    Btw, TMTA is doing a presentation today at Moors & Cabot Semiconductor Conference, starting at 9:40a.m. PST, not sure if anything from that will have an impact on the stock intraday.
  2. Tried to Short but on the Hard to Borrow list.:mad:
  3. I changed my mind on this company after listening to the Moores & Cabot presentation and left the thousand shares I had on the table. Didn't sell a single share.

    Yeah, I know, you don't turn a trade into an investment, but after really reading and understanding the story, my mindset changed.

    I was really impressed with their CEO.

    They earned $.04 this quarter. If they continue at this pace(and I think they will do better then this quarter in 06 quarters) they will earn $.16/share over a 4 quarter period. With a conservative P/E ratio of 20, that puts this stock over $3/share. This thing still has plenty of room to run. I'm tempted to buy more.

  4. KevinK

    KevinK Guest

    Dude--if you are going to make a fundamentally based arguement do your homework:

    Even the 2 analysts covering this stock believe the company will not earn positive earnings this fiscal year. And the one analyst covering the stock for fiscal 06 thinks the company will earn a mere .05 per share. Even though this is a growing company I mean your $3 price target means you think the company is worth 55x earnings/enterprise value.

    You probably know more about the company then I do since I just glanced at the ratios and estimates, but if you are going to make claims such at .16 this year, please justify it.

    Now if you can justify 1) your estimates 2) your price target...please do so.
  5. Not the current fiscal year but this quarter and the next three was where I was going. Just 4 quarters in a row.

    $0.16 was rough. When they actually file the quarterly, we'll be able to go through that and compare to the statements made in the conference call to get a better idea of where they might be in the coming quarters.

    The deferred revenues is going to be the tricky part to forecast, but I'll try. They are not recognizing revenue until after they transfer technology to customers. The current amount this quarter, off the top of my head is around 15 million. This will be recognized within 9 months according to what I heard on the call.

    How I think they're going to be able to increase income from where they are today:

    160 engineers working fulltime for CONTRACTS with Sony and Microsoft. They earn between $275 and $300/hour. Margins about 50%. The revenue from those contracts will not be recognized until the technology is transfered. Within the year it will be. When the products ship, transmeta will see royalties for each chip. There's talk of additional contracts both continued and with new companies.

    They're working with handset manufactures to bring their fast yet low power processors to that market. NEC was mentioned. As Steve Jobs said, "in the future, it's going to be about performance/watt." Transmeta has the best technology as far as that is concerned. (Intel is catching up) If people want their portable devices to do everything and then some while giving reasonable battery life, they're going to need power saving technology of some sort.

    They also talked of a phenomenon called "leaking" where processors made with new 90 nanometer and smaller processes have problems with power leakage when the processors are used. IE , they get REAL hot while wasting power. This doesn't just effect embedded devices, it even effects big iron like servers. It's why IBM had to resort to dual cores and SOI. Processors can be made fast with the transmeta technology without the expense of dual core, SOI or fancy cooling.

    and I'm here to learn, so when I update this thread with my thoughts on estimates after they post numbers, pick me apart if you disagree again!

  6. Grew

    Grew Guest

    have a pretty big long position (its all relative) and from what i've gathered from their slides at the moors and cabot conference I have the following

    1) have appx 15M of deferred revenue that they have stated will be recognized over 2H '05.

    Creative Assumptions (easy math)

    1) Constant Product (90nm Efficion) Revenue (7M/Q)
    2) No new Fabs/Licensees
    3) Services revenue remains constant (7.6M/Q)
    4) Opex Grows at 20% for 2H '05 and remains constant after
    5) Deferred Rev split evenly over 2 quarters

    With Those in mind you have a quarterly revenue stream of (7+7.6+7.5) = 22.1 M
    Opex = 12M
    Net = 10.1MN
    EPS = .06 (Rounded)

    Which Means you have them earning appx .12 over 2H '06

    Also keep in mind you are valuing a company without including the 98% margins on royalties on their intellectual property that will grow from 3-5m in 2006 to 10-15M in 2007.

    Therefore i think it isn't absurd to assigning a 20 Multiple on their earnings. putting it about (.04 + .06 + .06 +.026) .186 X 20 = $3.72 PPS

    Looking over the next 12 months may mean that a $3.00-$4.00 Price target is more reasonable; however add another Fab/licensee or 2 and/or the Cell processor takes off and you could see the company generating 20-30M in royalties in 2007. With that in mind. $1.30 Sounds pretty cheap to me

    Keep in mind i put this together very quickly and if anyone would like the excel file with all of my assumptions and calculations i will post it.
  7. Chagi


    Interesting posts.

    A couple of additional details that are worth mentioning are that TMTA is doing some sort of engineering work for Microsoft at this time, as well as Sony. The Sony contract is the bulk of the current engineering work, I think the conference call mentioned something like 100-120 engineers working on the Sony project, and probably somewhere in the ballpark of 20-30 on the Microsoft project (though management refused to confirm the Microsoft numbers). The $10 mill in license revenue was all from Fujitsu (I think).

    The Microsoft bit is very interesting, because it doesn't appear to be related to LongRun2 licensing. In addition, the engineering work is apparently going to last for roughly two more quarters (TMTA is unable to disclose the exact length of this). My speculation is that this is either some work in relation to Xbox360 (due to the timeframe involved), but more likely it has something to do with the fanless media center concept that Transmeta announced back at CES 2005. Even without getting into specifics, what exactly does Microsoft (primarily a software company) need with a company that specializes in low power tech?

    TMTA management also appears to be providing very conservative guidance. For example, they had previously issued a PR re: cashflow positive for Q2 in advance of reporting for the quarter, but they made no mention of the fact that the quarter would also be profitable.

    Btw, the quarterly PR has some fairly detailed numbers towards the end:

    If you look back at some of my old posts on these forums, I had been taking a detailed look at TMTA about a year ago, they have since managed a very major turnaround. Heck, their auditors raised the "may not continue to be a going concern" red flag just a few months ago.

    One thing that is irritating about TMTA though is that it tends to be difficult to forecast revenues for future quarters, since licensing and service contract details are not publicly disclosed.
  8. Chagi


    Wow, I really wasn't expecting the big upwards move today (25%), was instead expecting things to consolidate for a bit around $1.30 or so after the previous gap-up, or possible even retrace a bit lower.

  9. mhashe


    I sold 1/2 of mine rather early at 1.31 a/h on the day of earnings. Usually this works out rather well. But now it looks like I'll have to buy it back higher, no way it's going back below that gap. Whole new animal now.
    #10     Aug 15, 2005